March 11, 2007

In response to Mexico's telecom monopolist being worth $49 billion, a reader writes:

Ah, Telecom. Clean loot!

Isn't it amazing how skullduggery in anything having to do with communications or entertainment never seems to elicit the abhorrence that afflicts something in, oh, oil or the construction business or any industry with big heavy pieces of metal involved. I was thinking of that when you mentioned Oklahoma Senator Robert Kerr [a brilliant Democrat considered too crooked to be President in 1960]. I think he took his money from oil and construction, two industries that Lyndon Johnson had stayed away from as soon as he got into politics in the early 1940s. Instead, Johnson piled up a personal fortune by grabbing radio licenses, legally through his influence at the FCC. They were put in his wife's name, but one suspects the key distinction is that all the money came from shooting electrons across the airwaves, not pulling gunk out of the desert.

And Mark Warner, for a while poster boy for the new Democrats, played an updated version of the same game, all honest and legal, by energetically deploying his Harvard Law skills to grab the early cell-phone licenses that were allocated without any auction to recover monopoly rents for the government. The sources of his great personal wealth were barely mentioned during coverage of his brief campaign. In contrast, Jack Abramoff profited off the competition for Indian Casinos, another 'dirty' industry in most people's minds. It was never shown that Abramoff did anything illegal in helping his clients (he is going to jail for something else.) But there is something about casinos that dirties anyone who gets near them. Even Bruce Babbitt, so to speak the straightest arrow in American politics, got caught up in an investigation of the allocation of casino rights when he was Secretary of the Interior.

6 comments:

Anonymous
said...

Steve,

One recent exception to the trend of successful telecom looters is the case of the money manager Mario Gabelli. Perhaps because he isn't a politician (he's a money manager) or perhaps because the Bush Administration DoJ has been particularly hard on white collar crime -- or perhaps because of a combination of both -- he got snagged.

BTW, here is the article I mentioned in the last thread about Wal-Mart's Mexican subsidiary. This is an encouraging story about Mexico in that it shows that a well-run, meritocratic, non-nepotistic corporation can find competent labor among Mexico's Amerindian population. Mexico would be better off if top-tier multinational companies were allowed to compete in other sectors of its economy -- including telecom, energy, etc.

I think the thing is that nobody understands any of these high-tech crimes. One of the libertarian crowd's criticisms of the prosecution of Michael Milken was that nobody was able to explain exactly what he had done wrong. Most people didn't understand why letting Microsoft have a monopoly was bad until their computers were overflowing with spam and popups. Our minds are built to deal with physical commodities. It's the same reason music sharing never seems like theft--nobody gets deprived of the original.

I guess a hardcore libertarian or Randian might ask why "the people" can be said to own a broadcast spectrum, when the same people wouldn't even know it existed if it weren't for inventors who came up with ways to make use of it. In that sense, the government auctioning off rights to use a High-Def spectrum is just a form of taxation or rent-seeking.

Gabelli's case isn't that complicated though, and doesn't require an in-depth knowledge of tech. Essentially, he cheated at a government auction (by paying acquaintances to be bidders who would later sell their rights to him).

I think the Mark Warner-type of case is more distressing though. I'd rather see our politicians paid significantly more money -- multiples of what they are paid now -- combined with strict rules preventing them from otherwise cashing in on their offices. I think it's a scandal that Harry Reid (to use one prominent example) has four sons who are lobbyists.

It's absurd to assert that Lyndon Johnson didn't take construction or oil money. He took oil money [you're talking a Texan congressman in the '30s and 40s -- remember the sacred 27 and a half pecent deletion allowance?] and was notoriously cozy with the Browns of Brown & Root, grandfather of Cheney's Halliburton. Lyndon did make a fortune on FCC-issued licenses, but he was a whore who'd trick with whoever had the price of a screw. LBJ was probably the most money-corrupt president of the second half of the 20th Century.

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